California Chrome And Belmont Stakes Cost New York Taxpayers A Bundle

California Chrome may be a sure thing to win today's Belmont Stakes and become the first horse since Affirmed in 1978 to win horse racing's triple crown. And capturing the triple crown will mean a big money for the owners of the horse, Steve Coburn and Perry Martin.

But for New York State taxpayers horse racing is a losing bet.

The New York State Racing Association, a non-profit arm of the state, runs three horse racing venues: Belmont Park, Aqueduct Racetrack and Saratoga Race Course. The race tracks--each of them--are a money pit for taxpayers.

During the past three years the combined operating losses of the three tracks was $184 million, according to an audited report by KPMG. From 2011 to 2013 operating losses more than doubled, to $85 million from $34 million despite revenues increasing by $21 million over the same period.

Kentucky Derby 2014-0186 (Photo credit: Bill Brine)

Why? The cost to run the race tracks has exploded, mainly because of VLT (video lottery terminal) expenditures. Over the past three years VLT expenses have increased to $55 million from $5.8 million. And the numbers could get much worse for taxpayers.

As Patrick Battuello recently explained: VLTs, or slots, directly subsidize the state’s racing industry. Here’s how it works: As a condition for securing VLT licenses, track owners are required to continue running horseraces, whether profitable or not. But more importantly, a sizable chunk of slots revenue is funneled into the racing industry – higher purses, breeding supplements. If not for this largess, much of NY racing, especially the harness variety, would have vanished by now. In general, racing can no longer subsist on product alone, as evidenced by declining handle and attendance.

Another problem for taxpayers: Approximately 683 or 56% of NYRA’s 1,223 employees work under 25 collective bargaining agreements. They earn in compensation and benefits an average of $70,000 and contribute one quarter of the NRYA's operating expenses. Look for those costs to increase.

According to KPMG: "Eight of those 25 contracts, representing 61% of the unionized workforce, were expired as of December 31, 2013. IBEW
Local 3 represents 130 of those employees with expired contracts, and there is risk of labor disruption that has the potential to disrupt operations. NYRA has appropriate contingency plans to address such a disruption should one occur. Approximately 30% of those unionized employees are represented by unions whose existing labor contracts will expire in 2014. The NYRA has accrued approximately $2,053,000 for retroactive wage adjustments that are expected to be paid upon renewal of expired contracts."